AD HOC ANNOUNCEMENT PURSUANT TO ART. 53 LR
Q3 2022: Sales increased by 27 % in local currency to CHF 1.312 billion, supported by both pricing and volume growth, EBITDA margin increased to 16.8 % versus 15.5 %
9M 2022: Sales increased by 29 % in local currency to CHF 3.875 billion, EBITDA margin increased to 16.9 % versus 16.2 %
Clariant signs definitive agreement to sell North American Land Oil business
Full Year 2022 Outlook: Strong local currency growth for the Group to around CHF 5.1 billion, with the confirmed aim to improve the year-on-year underlying Group EBITDA margin level. Full year 2022 reported Group EBITDA margin will be impacted by restructuring charges in Q4 2022 related to the implementation of the new operating model
“Our performance in the third quarter was, as anticipated, fueled by sustained pricing amidst a moderate sequential decline in raw material costs, combined with renewed momentum in Catalysis, most specifically within the Petrochemicals segment. As signaled previously, we see demand declining in some segments, most notably in Europe in response to the weakening economic environment, yet we nevertheless increased sales and profitability significantly in the third quarter. Further, we announced today the divestment of our North American Land Oil business in a further move to focus our business on true specialty chemicals and to improve our sustainability profile.
I would like to thank all my colleagues for their hard work and for the excellent results we achieved in a very challenging environment,” said Conrad Keijzer, Chief Executive Officer of Clariant.
“For the full year 2022, we increase our sales guidance to approximately CHF 5.1 billion while aiming to improve our year-on-year underlying Group EBITDA margin versus the prior year’s level. In the fourth quarter, we anticipate additional restructuring charges related to the implementation of our new operating model, which simplifies our organizational structure and enables continued progress toward our confirmed 2025 goals,” Conrad Keijzer commented further.
Key Financial Data (1)
in CHF million
EBITDA before exceptional items
(1) Q3 and Nine Months 2021 restated. The figures were rounded, and hence, minor reporting deviations might occur
Third Quarter 2022 – Continued sales growth and profitability progression
MUTTENZ, OCTOBER 27, 2022
Clariant, a focused, sustainable, and innovative specialty chemical company, today announced its third quarter 2022 results. In the third quarter of 2022, sales from continuing operations were CHF 1.312 billion, compared to CHF 1.096 billion in the third quarter of 2021. This corresponds to an increase of 27 % in local currency and 20 % higher sales in Swiss francs. Both pricing and volume growth positively impacted the Group sales result by 18 % and 9 %, respectively, while the currency impact was -7 %. Sales growth was strong in all three Business Areas: Care Chemicals, Catalysis, and Natural Resources.
In the third quarter of 2022, local currency sales growth was robust in all geographic regions. European sales grew by 22 %, as prices were increased while volume growth slowed. Sales in Asia-Pacific also grew by 19 %, primarily propelled by pricing in Care Chemicals and Additives, while Catalysis volumes increased. North American sales were 30 % higher, and Latin American sales grew 38 %. The strong advances in both regions were supported by strong pricing in all three Business Areas. The Middle East & Africa increased sales by 62 %.
Care Chemicals increased sales by 24 % in local currency in the third quarter of 2022. This positive development was driven by double-digit growth in Consumer Care and Industrial Applications, especially Crop Solutions and Personal Care. Catalysis sales rose by 28 % in local currency, primarily due to volume growth in Petrochemicals and Specialty Catalysts. Natural Resources sales increased by 30 % in local currency with growth attributable to all three Business Units, especially Additives.
Continuing operations EBITDA grew to CHF 220 million while the corresponding 16.8 % margin increased from the 15.5 % reported in the third quarter of the previous year. This improvement was propelled by pricing measures that fully offset the continued high raw material cost increase (approximately 24 % year-on-year) and higher energy and logistics cost. Additionally, operating leverage from higher sales and cost savings (CHF 2 million savings from performance programs during the quarter) also contributed positively to the margin increase. The absolute EBITDA increased by 29 % versus the previous year and significantly exceeded the CHF 151 million (14.5 % margin) pre-pandemic level reported in the third quarter of 2019.
Clariant has agreed to enter into a definitive transaction documentation to divest its North American Land Oil business to Dorf Ketal, a specialty chemicals manufacturer and service provider headquartered in India. This divestment is a further step to structurally improve Clariant’s portfolio and sustainability profile while focusing operations on specialty chemicals and value-adding solutions. Clariant’s North American Land Oil business is a provider of chemical technologies and services to the North American oil and gas industry and generated sales of USD 113 million in 2021. The initial sales price, subject to standard closing conditions, is set at USD 14.5 million. This transaction will result in a noncash impairment of approximately CHF 245 million, which will be recorded before the year-end and does not affect EBITDA as presented for the third quarter of 2022. The transaction is subject to customary closing conditions and is expected to be consummated in the first quarter of 2023.
First Nine Months 2022 – Specialty chemical portfolio, pricing, and cost discipline enabled sales and profitability improvements
In the first nine months of 2022, sales from continuing operations were CHF 3.875 billion, compared to CHF 3.130 billion in the first nine months of 2021. This corresponds to an increase of 29 % in local currency, 26 % of which was organic. Both pricing and volume growth had a positive impact on the Group of 18 % and 11 % (8 % of which was organic), respectively, while the currency impact was -5 %.
In all geographic regions, sales growth in the first nine months of 2022 exceeded 24 % in local currency with a particularly strong performance in North America, Latin America, and the Middle East & Africa.
Care Chemicals grew sales by 37 % in local currency in the first nine months of 2022 with continued double-digit sales growth in all key businesses. In Catalysis, sales rose by 12 % in local currency, underpinned by Specialty Catalysts and Petrochemicals. All three Business Units, Oil and Mining Services, Functional Minerals, and especially Additives, contributed to the 28 % local currency sales growth reported in Natural Resources.
Continuing operations EBITDA increased by 30 % to CHF 656 million as the Group again improved profitability on the back of notable sales growth. Continued pricing measures and operating leverage offset raw material price increases of approximately 34 %, compared to the first nine months of 2021. Furthermore, the execution of the performance improvement programs resulted in additional cost savings of CHF 10 million in the first nine months of 2022. The EBITDA margin increased to 16.9 % from 16.2 % in the first nine months of 2021 due to the Group’s ongoing cost discipline and the profitability improvement in Care Chemicals and Natural Resources, which more than offset the relative weakness in Catalysis.
ESG Update – Leading in sustainability
Clariant strives to be safe and sustainable in all of its activities. The Group’s efforts center on fighting climate change, creating safe and sustainable chemistry, increasing circularity, fostering a sustainable bioeconomy, minimizing waste, eliminating pollution, and creating social value. This includes fostering the development of employees as well as sustainability in the local communities in which Clariant operates.
Fighting climate change remains high on Clariant’s agenda and also for many of its stakeholders. The Group continues to implement its 2030 roadmap to achieve its science-based climate targets, which aim for a 40 % absolute reduction in Scope 1 and 2 greenhouse gas emissions and a 14 % absolute reduction in Scope 3 greenhouse gas emissions from purchased goods and services by 2030, compared to baseline 2019 levels. These targets are accompanied by intensity-reduction targets for the key environmental parameters in its operations.
In the first nine months of 2022, the Group’s Scope 1 and 2 emissions improved as a result of increased energy efficiency through the sun-drying of clays and an accelerated transition to renewables – specifically the switch from coal to biomass at some sites and a higher share of green electricity purchased. For example, Clariant implemented a ten-year green electricity supply contract across its business units in Indonesia. The Group also began a power purchase agreement (PPA) at the Clear Lake site in the USA together with the site operator Celanese. Clariant expects its emissions footprint to remain significantly below last year’s level and the baseline year 2019.
Clariant’s catalysts and adsorbents deliver significant customer value by driving higher production throughput, lowering energy consumption, and reducing hazardous emissions from industrial processes and combustion engines. In recognition of this accomplishment, Clariant and its engineering and technology partner, Technip Energies, recently received two industry awards for their EARTH® technology: the ICIS Innovation Award 2022 for Best Process Innovation and the Hydrocarbon Process Award 2022 for Best Refining Technology. In parallel, Clariant and Technip Energies reached another milestone by installing EARTH® technology at a large-scale hydrogen plant in one of Europe’s biggest refineries. The revamp is expected to significantly increase the plant’s production capacity. EARTH® is a pioneering drop-in solution that enables a capacity increase in the production of hydrogen by up to 20 % while decreasing CO2 emissions by up to 10 % and reducing make-up fuel consumption by up to 50 % per unit of hydrogen produced. The technology is carbon-capture-ready and can play a key role in global efforts to reduce emissions with low-carbon hydrogen.
Outlook – Full Year 2022
Clariant aims to grow above the market to achieve higher profitability through sustainability and innovation. The Group concluded its portfolio transformation program by divesting Healthcare Packaging in 2019, Masterbatches in 2020, and Pigments in January of 2022. Clariant has become a true specialty chemical company and confirms its 2025 ambition to deliver profitable growth
(4 – 6 % CAGR), a Group EBITDA margin between 19 – 21 %, and a free cash flow conversion of around 40 %.
In the fourth quarter of 2022, Clariant expects to generate continued solid sales growth in local currency versus the prior year, underpinned by higher prices in all Business Areas despite an expected sequential normalization in volumes in Care Chemicals and Natural Resources and an increasingly challenging comparable base. Clariant expects Catalysis’s performance to further improve despite a continued negative impact from the sunliquid® ramp up. Additional restructuring charges will be booked in the fourth quarter due to the cost of implementing the new operating model. The fourth quarter 2022 reported EBITDA margin is therefore expected to be clearly lower than the restated year-on-year margin levels.
For the full year 2022, Clariant expects strong sales growth in local currency for the Group to around CHF 5.1 billion, based on continued pricing measures and the strong first nine months of 2022. The current high level of uncertainty resulting from geopolitical conflicts, the suspension of business with Russia, and the resurgence of COVID-19 are expected to continue to negatively impact global economic growth and consumer demand in the fourth quarter of 2022 and in 2023. Clariant expects the high inflationary environment with regard to raw materials (despite some easing from peak levels) and energy (in Europe in particular) to persist. Despite the additional restructuring charges, the continued negative impact related to the sunliquid® ramp up, and the increasingly challenging economic environment, Clariant aims to improve its year-on-year underlying Group EBITDA margin level via solid revenue growth, driven by pricing and continued cost discipline. The full year 2022 reported Group EBITDA margin will be impacted by restructuring charges in the fourth quarter of 2022 related to the implementation of the new operating model.
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